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Debt burden stares at TS
Govt plans corrective measures to save state from crisis
Hyderabad: With the state's public debt outstanding already crossed to an alarming level of Rs 2 lakh crore, the Telangana Government has come out with a 'plan of corrective measures' to reduce the debt burden in the new financial year 2020-21 and save the state from the impending fiscal crisis.
The first option before the government is to increase the existing taxes in the state purview and lower seeking the loans from the external agencies to meet the finance needs in the next financial year which begins from April 1. Increasing taxes was hinted by Chief Minister K Chandrashekar Rao at a recent press conference.
According to senior officials, "The mounting debt burden has reached to 21.4 per cent of the state GSDP this year. If it goes up to 24 per cent to 25 per cent, state will plunge into fiscal crisis."
The only option before the government, the source felt, was to curtail the debt burden by not resorting to taking fresh loans and generate more revenue by revising the existing tax structure. The best possible way before the government is to increase the taxes being collected from different sources mainly the enhancement of property taxes in municipalities and other local bodies, increase of the market value of the lands, liquor price hike and power tariff hike to meet the financial needs mainly for the implementation of the welfare schemes and developmental programmes.
Currently, the VAT collected on petrol and diesel is 33.31 and 26.01 per cent respectively in Telangana. Maharashtra is collecting the highest taxes on fuels in the country. The possibility of hike in VAT on fuels is also not ruled out.
To overcome the growing public debt outstanding, the government will have to stop seeking loans from different agencies mainly open market loans from the Union government, autonomous bodies and special securities through small savings and provident fund.
In the current year, Telangana has got nearly Rs 40,000 crore as loans. As a result, the debt percent of the GSDP (Gross State Domestic Product) has increased to 21.39 per cent from 20.77 per cent in 2018-19 financial year. The Telangana state's public debt outstanding in 2016-17 was Rs 1.29 lakh crore and in just four years it crossed Rs 2.03 lakh crore.
Officials said that if the debt burden touched 25 per cent, state will have to face severe financial crisis mainly the state will lose the freedom to seek more loans as per the FRMB (Fiscal Responsibility Budget Management) Act. Under the Act, state borrowing capacity will go down to 3 per cent once the debt burden touches 25 per cent of the GSDP. At present, Telangana can borrow up to 3.5 per cent of the GSDP, an official said that the government is serious to adopt a financial discipline in the coming financial year to check the threat of huge debt burden on the state in the next five years and stop losing the freedom of getting more loans within the FRBM Act.
